With a population of more than 127 million people and a GNI per capita of US$9,710, it’s no wonder that many US companies are moving south to Mexico. Creating a Mexico company gives teams access to new talent and a thriving marketplace to refresh old products and services.
The country also draws attention from companies seeking affordable property, land, and labor. For example, many powerhouses in the auto industry moved parts of production to Mexico during the past couple years for access to work and affordable warehouses.
It’s also a favorite spot for smaller companies starting their international expansion. If Mexico is on your radar, here are best practices for starting a successful operation.
Common Types of Mexico Companies
There are many business forms in Mexico, similar to the US. The two most common Mexico company forms are Sociedad Anonima (S. A.), a corporation, and Sociedad de Responsabilidad Limitada, a limited liability company.
Each corporation has its set of requirements. For example, the S.A. must have a minimum of two stockholders and its minimum capital stock cannot be less than N$50,000 pesos, or roughly $US2,500.
Steps for Creating a Mexico Company
Establishing a Mexico is not a simple process. You should always consult an international consultant or trusted attorney with in-country experience to guide you through this process. With that being said, we put together a few of the steps for your company to use a guide while creating a plan to enter Mexico.
Steps for creating a Mexico company include, but are not limited to, the following:
- Claim the name of your business.
- Partner with a notary to obtain a deed and property in Mexico.
- Get proper identification for your business including a Mexican Social Security Institute (IMSS) and Tax Registry Number (RFC).
- Register your company with the National Business Information Registry (Sistema de Informacion Empresarial, SIEM).
- Rights of Foreign Companies in Mexico
Mexico legally recognizes international companies so they can operate in the country after following necessary steps. In particular, your business must be approved by the National Commission of Foreign Investments and Ministry of Foreign Relations and must register at the Public Registry of Commerce.
Companies must hold an annual ordinary shareholders’ meeting (General Law of Commercial Companies). In the case of the SA, this session must be at the beginning of the first quarter of the year.
In these meetings, the shareholders have the opportunity to approve the financial statements of the company and the sole administrator or board report.
Companies must also renew their registration at the Register of Foreign Investment annually.
Business Taxes in Mexico
Mexico companies pay both federal and state taxes, similar to the US. Managing taxes, especially income tax, gets complicated and is one more reason you should always work with an in-country expert. Staying compliant is necessary for finding success overseas.
Federal taxes include:
- Income tax calculated at 30% of gross income.
- Value added tax paid at 16% on the sale of goods and services.
- Social Security tax split between the company and the employee.
State taxes vary in each region. Make sure you have a full understanding of your business’ requirements before performing any work and paying employees.
Using an Agile Approach to Create a Mexico Company
If you can avoid it, we urge you to avoid setting up a foreign subsidiary in Mexico and instead, use an agile approach like Foreign Subsidiary as a Service (FSaaS).
FSaaS manages risk and compliance for your business to let you establish yourself in Mexico. This service gives your company a legal presence without the burdens that come with a permanent subsidiary.
For example, FSaaS saves your company thousands of dollars and months of time compared to establishing a Mexico company on your own. It also gives you the option of getting out of the market if things don’t work out as planned.
To learn more about this agile approach to global business, contact us at (303) 309-2894.